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The gann’s pyramid is a basic of the trading, invented at the start of the last century. We could compare it to the Elliot waves or to the Fibonacci retracement (Gann also worked on others types of retracements). The Gann's pyramid doesn’t allow making day trading. It’s a MT, LT analyzing tool. She allowed mostly seeing where the price is going, where it will face zone of resistances and supports.
We do not have yet a study which shows that the Gann’s pyramid is working. Nevertheless, I invite you simply to take historical price and follow the moves which have been done into the pyramid. You will see that the result is surprising.
To position your price in the pyramid, the principle is very simple : 1.50 correspond at 150. At the contrary, for parity quoted in hundreds, the price doesn’t change. (if a parity quote 98, we will place 98 on the pyramid)
The Gann’s pyramid introduced above is very important. She gives vital information, some points are suggested. Indeed, the pyramid is mostly introduced with round numbers. It’s the case in our website because of the space… Yes imagine that we have to put all numbers 118.5; 119.5… The Gann’s pyramid will be enormous!! But, it’s not a reason to forget these points notably if they correspond to a zone of support or resistance according to the case. What is show is the original pyramid is that some green points (less important) are not visible on the table of the pyramid. It’s the case for 108.5; 113.5; 118.5… Normally, on each line of the table, it should have 2 green points if the pyramid is parsed 0.5 by 0.5. So, between 81 and 121, all the green points are not visible. Even if these points do not have a big importance, you need to take them into consideration. The practice showed us that these points are sometimes reversal trend points.
It’s surely the question that you all ask. The theory is pretty good but you need to let place to the practice. First, you need to know how the pyramid functions. A journey is considered as validated if the closing price is above (or below) 50 pips of the line considered. To enter in position, two journeys must be validated. Some people will tell you that one day is enough. It’s your choice but note that the validation by 2 journeys allow to eliminate a high number of false signals. According to various comments that I could picked up, I advise you to adopt this last method.
The placement of stop loss and take profit:
The Gann’s pyramid must be used in a MT or LT timescale. Indeed, objectives are around several hundred of pips, it is therefore unusual that this one was reached in one day. Mostly, the trade is done in a week. Of course, there are no précised rules, movements of the market could be violent and your stop loss or your target reaches fastly. Because you don’t trade on the day, your stop loss msut be far away to avoid being executed cause of a correction movement. Mostly, your stop loss will be between 120/150 pips. Aie!! But this is only an idea. The risk is not changed if you trade in money management. After, according to your profit’s objective, it is important to adapt your stop to block your P/L ratio around 3. (in your head: 120*3=360 pips). And yes, the risk is maybe high(and controlled) but the expectation of profit is also high. Nevertheless, although lines of different colors can be considered as objectives to reach, place your objective few dozen below (or above according to the side) is judicious. Here again, this is practice who speak. This method could make you rich. The important is discipline. You must keep your objectives and do not be scared at each movement of the market. There are days where the market will go only in the wrong side for you. This is normal because there are correction movements all the times. The market do not make a straight line to your objective.
We do not have yet a study which shows that the Gann’s pyramid is working. Nevertheless, I invite you simply to take historical price and follow the moves which have been done into the pyramid. You will see that the result is surprising.
To position your price in the pyramid, the principle is very simple : 1.50 correspond at 150. At the contrary, for parity quoted in hundreds, the price doesn’t change. (if a parity quote 98, we will place 98 on the pyramid)
The Gann’s pyramid introduced above is very important. She gives vital information, some points are suggested. Indeed, the pyramid is mostly introduced with round numbers. It’s the case in our website because of the space… Yes imagine that we have to put all numbers 118.5; 119.5… The Gann’s pyramid will be enormous!! But, it’s not a reason to forget these points notably if they correspond to a zone of support or resistance according to the case. What is show is the original pyramid is that some green points (less important) are not visible on the table of the pyramid. It’s the case for 108.5; 113.5; 118.5… Normally, on each line of the table, it should have 2 green points if the pyramid is parsed 0.5 by 0.5. So, between 81 and 121, all the green points are not visible. Even if these points do not have a big importance, you need to take them into consideration. The practice showed us that these points are sometimes reversal trend points.
It’s surely the question that you all ask. The theory is pretty good but you need to let place to the practice. First, you need to know how the pyramid functions. A journey is considered as validated if the closing price is above (or below) 50 pips of the line considered. To enter in position, two journeys must be validated. Some people will tell you that one day is enough. It’s your choice but note that the validation by 2 journeys allow to eliminate a high number of false signals. According to various comments that I could picked up, I advise you to adopt this last method.
The placement of stop loss and take profit:
The Gann’s pyramid must be used in a MT or LT timescale. Indeed, objectives are around several hundred of pips, it is therefore unusual that this one was reached in one day. Mostly, the trade is done in a week. Of course, there are no précised rules, movements of the market could be violent and your stop loss or your target reaches fastly. Because you don’t trade on the day, your stop loss msut be far away to avoid being executed cause of a correction movement. Mostly, your stop loss will be between 120/150 pips. Aie!! But this is only an idea. The risk is not changed if you trade in money management. After, according to your profit’s objective, it is important to adapt your stop to block your P/L ratio around 3. (in your head: 120*3=360 pips). And yes, the risk is maybe high(and controlled) but the expectation of profit is also high. Nevertheless, although lines of different colors can be considered as objectives to reach, place your objective few dozen below (or above according to the side) is judicious. Here again, this is practice who speak. This method could make you rich. The important is discipline. You must keep your objectives and do not be scared at each movement of the market. There are days where the market will go only in the wrong side for you. This is normal because there are correction movements all the times. The market do not make a straight line to your objective.
Gann's pyramid table updated the 02/03/2009
